L&D As A Revenue Center
To determine whether your Learning and Development (L&D) team is a cost center or a revenue center, you must look at your organization and who is in the room when business goals are set. If L&D is at the table, they are most likely contributing valuable training products that enhance and improve the overall business strategy and by extension, the business’s bottom line. And what if they aren’t?
The Room Where It Happens
Most organizations have one-year, five-year, and even ten-year strategic plans with measurable goals they want to achieve. Bringing L&D into the conversation when setting the goals not only ensures that training considerations are included in business goals, but also offers a completely different perspective on how to approach and even achieve those goals. Business pros can decide what they want to improve or change and by how much. L&D pros can determine what role learning plays in getting those results.
Learning projects and programs that are tied back to business goals offer L&D the chance to demonstrate value and results. This type of inclusion may require a cultural shift in an organization. L&D is often used to garner short-term reactive results to immediate issues. However, L&D is really a long game. The result of well-planned, well-developed training projects and programs is sometimes not immediate. It takes a little time for the outcomes and objectives to produce meaningful data. This is not always popular with the C-suite. So, what do you do?
1. Begin At the End
Like a lot of things in learning development, you start with the end in mind. All learning should be created based on the desired outcomes. Tying training efforts to business goals just takes program development one step further. When L&D is at the table, they can ask the stakeholders, what does success look like? What outcomes are important to the business? How can we leverage training efforts to meet those outcomes? They can offer a framework for success.
Tried and true: Kirkpatrick
Kirkpatrick’s four levels of training evaluation is a key tool that has been used to measure training efficacy since the 1950s. And while it comes ready-to-use with specifics aimed at connecting training and business goals, these components—levels 3 and 4—are often underutilized or skipped altogether.
- Level 1: “reaction”
This learner-centered measure focuses on learner satisfaction, engagement, and job relevance. These measures are often included in end-of-course surveys and other “smile sheet” tools.
- Level 2: “learning”
This learner-centered measure focuses on whether the learner thinks they have acquired the skills, knowledge, and confidence the training intended to deliver.
- Level 3: “behavior”
The goal of every training event is to change behavior. This measure is intended to capture behavioral changes after learning and the knowledge transfer from the classroom to the desk.
- Level 4: “results”
This measure focuses on whether the targeted outcomes resulted from the program. These targeted outcomes are business goals.
According to research conducted by the Brandon Hall Group in 2020, 30% of their respondents do not measure level 3 and over 40% never measure level 4. Why? Because they are the most difficult to capture.
For example, one of the best practices for measuring level 3 is to wait 3–6 months after training is complete and to utilize observations conducted by supervisors or managers to confirm the successful use of knowledge and performance of tasks taught in training. For C-suite, 3–6 months can seem like a long time. For managers and supervisors, these observations can take time to complete and report, and add to their already tight schedules and packed to-do lists. Level 4 is difficult to measure for most because the learning outcomes were not tied to business goals in the first place. If the learning goals are not tied to business outcomes, how can L&D show stakeholders and leaders that they were successful?
2. Let’s Talk ROI
There are those who want it and those who don’t. Some will argue that asking L&D, a traditional cost center, to use business ROI calculations doesn’t add up. “A cost center receives funding either through a budget or paid by a profit center. The cost center then uses this money to demonstrate a relevant, sustainable value contributing to the profit center’s output, not for it to be profitable itself” (Pangarkar, 2021). Others may insist on traditional ROI calculations and outputs to justify future funding.
Many of the traditional ROI supporters are slowly and quietly moving toward a more performance-based approach to evaluation. This performance-based approach is how stakeholders can really evaluate learning impact to see if training endeavors are impacting the overall business goals. Need to change hearts and minds? First, agree that training is a cost. However, emphasize that the evaluation of training should not be on the money, but on its impact. Training delivers value by improving activities that contribute to the bottom line.
3. Utilize Kirkpatrick Level 4
There is no need to come up with a new way to measure the impact. It’s already there in level 4. Some of the measures you often see in a level 4 evaluation include:
- Productivity rates
- Recruitment numbers
- Sales volume
- Turnover/retention rates
- Customer satisfaction
- Wastage rates
- Safety numbers
One of the most important things to consider when developing evaluation items for level 4 is that training does not usually occur in a vacuum. Training is often the result of change, in technology, software, new business practices, etc. Change is not always welcomed warmly, so the circumstances around training can also impact what the outcomes look like. At this level, it is not enough for learners to report they liked or disliked a training event. This level of evaluation requires careful thought and planning.
Tips For Implementation
Here are some things to consider when setting up evaluations to support L&D as a revenue driver:
- Set evaluation metrics up front. Know what the outcomes are and how they are going to be measured.
- Don’t rush the results. You must give the new knowledge and skills a chance to be incorporated into the work.
- Use multiple data inputs in your evaluation. You can ask for participant feedback, but pair this with something else, like observations, so you can get a full picture.